Enquiring Minds Want to Know

The July 25, 2012, tribute to Barton
Biggs received a large response. Biggs was obviously respected as well
as loved. In the end, virtue is its own reward. Virtue is rarely rewarded
in the world today; in fact, quite the opposite is true. It is refreshing
to see such outpouring for a man who stuck to his guns and was also successful.

Some correspondents wanted to know what James K. Glassman and Kevin Hassett,
co-authors of Dow 36,000, are up to now. (For background, see Barton
Biggs.) This cry poured in from near and far, including a message from
J. Rogers in Singapore: "Where are they now? What do they say now?" In
elaboration: "You should have exposed them further for the sake of all of
us."

Taking them one at a time:

James K. Glassman wrote two books after Dow 36,000. In 2002,
he wrote The Secret Code of the Superior Investor: How to Be a Long-Term
Winner in a Short-Term World. According to the publisher's blurb, the
book "focuses on the construction of a solid personal portfolio." Glassman
offered a "Secret Code," in "uncertain and volatile times".

For devotees, the secret code probably caused less damage than Dow 36,000 since
those who took Glassman's advice in 1999 had a lot less to lose by 2002.

Glassman writes a personal financial column for Kiplinger's Personal Finance.
He was once president of the Atlantic, which explains why Dow 36,000 received
such wide publicity in 1999. See below. (Who remembers Dow 40,000 and Dow
100,000?)

Glassman's financial planning advice in 2011 was dispensed in his third book Safety
Net: The Strategy for De-risking Your Investments in a Time of Turbulence.

In his review of Glassman's newest contribution (for Reuters), John
Wasik wrote that Glassman "made an effort to redeem himself with his latest
book." The book was published in February 2011 - so, as a guess, was completed
by the early fall of 2010. Glassman recommended that investors cut back on
U.S. stocks, buy emerging market equities, buy U.S. Treasury bonds, and buy
put options on stock markets for downside protection.

Glassman's prescription shows an ability to learn (this is rare among the cognoscenti and
a genuine compliment to the man), but he refuses to come clean. Wasik quotes
Glassman 2011 reflecting on Glassman 1999: "Yes, stocks bounced up and down
but your job as an investor was to hang on and collect your reward for perseverance
at the end. I advocated the same strategy of heavy and diversified U.S. equity
holdings that most sensible advisors espoused - but with an extra dollop of
optimism. And I was wrong."

Hanging on to "collect your reward" was not deemed necessary in 1999. Glassman
had plenty of print media experience. He knows that most readers of an advice
book cling to a catch-phrase (Stocks for the Long Run, 1994). Whatever
warnings Glassman & Hassett published in their book, their preview of Dow
36,000 in the Wall Street Journal on March 17, 1999, was quite
specific and sensationalist: "Our calculations show that with earnings growing
in the long-term at the same rate as the gross domestic product, and Treasury
bonds below 6%, a perfectly reasonable level for the Dow would be 36,000 -
tomorrow, not 10 or 20 years from now."

Glassman has taken the same position - the Dow hitting 36,000 was a long-term
calculation - when interviewed over the years. He spoke to Carlos Lozada in
the March 8, 2009, issue of the Washington Post, who asked the bubble-blower: "What
happened?" Glassman explained that he (and Hassett) made two points: "The
more important was that for investors who could put their money away for the
long term, stocks were a much better investment than bonds.... The second
point was that based on our calculations, we believed that stocks would rise
to roughly 36,000. We said in the book that it is impossible to predict how
long it will take for the market to recognize that Dow 36,000 is perfectly
reasonable...."

In addition to the Wall Street Journal preview, the Atlantic put Dow
36,000 on its September 1999 cover. This is a glaring example of when
an idea has captured the major media, you know its time has passed. In
the magazine of which Glassman was past-president, Glassman & Hassett
wrote:

"Stocks were undervalued in the 1980s and early 1990s, and they are undervalued
now. Stock prices could double, triple, or even quadruple tomorrow and still
not be too high."

"Stocks are now, we believe, in the midst of a one-time-only rise to much
higher ground - to the neighborhood of 36,000 for the Dow Jones Industrial
Average."

Turning back to John Wasik's review of Safety Net, he thought Glassman's
2011 advice should have been rendered in 1999. Reuter's essayist concludes: "Is
it time to absolve Glassman for his irrational exuberance more than a decade
ago?" Wasik answers with wise counsel: "[A] lot can be forgiven, although
nothing is forgotten."

Wasik's advice should be applied to all the failed phonies who told us subprime
mortgage problems were contained. These are the same central bankers, economists,
strategists, and monopolists of editorial pages who are oblivious today yet
still design policy and control its public discussion.

Currently, Glassman is the executive director of the George W. Bush Institute, "an
action-oriented organization focused on independent, non-partisan solutions
to America's most pressing public policy problems." One of the most pressing
problems is the unaccountability and elevation within the old-boys-and-girls-club
that has sewn such mistrust among the public. Glassman graduated from Sidwell
Friends School then marched forth with the avant-garde Harvard class
of 1969 (summa cum laude), where he edited the Crimson.

Kevin Hassett (Swarthmore; U Penn, Ph.D., economics; Assistant Professor,
Columbia University Graduate School of Business 1989-1993; Senior Economist,
Federal Reserve Board of Governors 1995-1997; American Enterprise Institute,
1997-to-present; currently, Bloomberg columnist) made one more stab
at the investment advice business with a 2002 book: Bubbleology: The New
Science of Stock Market Winners and Losers. From the publisher's blurb: "There
are only two types of stocks: those safe from bubbles and those that are not.
This is a fact of investing many discovered as they saw their fabulous gains
whittled away by the extreme calamity of the Internet sector."

From this, one gathers Hassett was shell-shocked into a schizophrenic, Good
vs. Evil investment approach. In any case, that was 10 years ago. He has since
co-authored two policy books with Glenn Hubbard, which should offer Hassett
a good shot at a high position in a Romney presidency (see "Limited
Hope"). Make what you will of that.

Sheehan serves as an advisor to investment firms and endowments. He is the
former Director of Asset Allocation Services at John Hancock Financial Services
where he set investment policy and asset allocation for institutional pension
plans. For more than a decade, Sheehan wrote the monthly "Market Outlook" and
quarterly "Market Review" for John Hancock clients.

Sheehan earned an MBA from Columbia Business School and a BS from the U.S.
Naval Academy. He is a Chartered Financial Analyst.